Sears Preparing To File Bankruptcy As Soon As This Week
The neverending saga of the world's longest melting ice cube, that of Sears Holdings which has flirted with bankruptcy for years only to get bailed out in the 11th hour by its biggest investor and CEO Eddie Lampert each and every time, is finally coming to its logical end.
With its stock crashing to a new all time low this week, and with a $134 million in debt due on Monday, cash-strapped Sears Holdings - which has been losing money for years - has hired M-III Partners to prepare a bankruptcy filing that could come as soon as this week, the WSJ reported citing people familiar with the situation, as the cash-strapped company that once dominated American retailing faces a debt payment deadline.
The WSJ reports that employees at M-III Partners, a boutique advisory firm, have spent the past few weeks working on the potential filing, with M-III staff seen at the retailer’s headquarters in Hoffman Estates, Illinois. That said, a Chapter 11 may still be avoided as Sears "continues to discuss other options and could still avert an in-court restructuring."
Furthermore, Eddie Lampert, the hedge-fund manager who is Sears’s chairman, chief executive, largest shareholder and biggest creditor, may once again simply rescue the company, as he has done on many occasions in the past by making the payment. What's different this time, is that Lampert is pushing for a broader restructuring that would include shaving more than $1 billion from Sears’s $5.5 billion debt load, selling another $1.5 billion of real estate and divesting $1.75 billion of assets, including the Kenmore appliance brand, which he has offered $400 million to buy himself.
Said otherwise, Lampert hopes to shrink Sears back to profitability with the company already closing hundreds of stores in recent years.
Unfortunately for the billionaire, a key stakeholder group is resisting efforts to continue business as usual: as a result of the company’s poor financial performance, its creditors have refused to support his out of court restructuring plan, which would leave bankruptcy as the only option.
One can't exactly blame the company's lenders for being skeptical: Sears has lost more than $11 billion since 2011, and its annual sales have dropped nearly 60% in that period to $16.7 billion. Analysts say it needs to raise more than $1 billion a year to stay afloat.